Is service taxable on works contract?????

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

22 January 2015 A manufacturing plant of a company is being constructed by a contractor in taxable territory.I want to know following details.

Point No1: Is service tax payable by the receiver of service?

Point No2: Contractor has recently issued a bill of Rs: 1.50 Crore on which it has charged 4.944% service tax amounting Rs; 741600/-. want to know, At which percentage above calculation is made by contractor, Is service tax payable by service receiver & how much percent(%) should he pay under reverse charged mechanism further Can he claim abatement?

CA Parveen Kumar

CA Parveen Kumar (Expert)
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24 January 2015 Reply to Point No.1: As per Rule 2(i)(d)(F) of STR, 1994 read with Section 68(2) of Finance Act, 1994 the service receiver is liable to pay Service Tax under reverse charge if the Service provider is Individual/HUF/Partnership/AOP.

Reply to Point No.2: The contractor has charged service Tax on 40% (original works) value of Service as per rule 2 of Service Tax Determination of Value Rules, 2006.

Querist : Anonymous

Querist : Anonymous (Querist)

29 January 2015 Mr. Praveen reply to your answer:-
Point No 1:- In the above case contractor is a company, would service tax be liable in the hand of contractor, however in the invoice it has charged 4.944% service tax on 1.50 crore.

Point No 2:- If contractor charges service tax @ 40% on 1.50 crore, service tax amount would be 741600/- but as you said contractor has charged 40% of service tax.

CA Parveen Kumar

CA Parveen Kumar (Expert)
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02 February 2015 Reply to Point No. 1: if the service provider is company then reverse charge not applicable on WCS. As you said the contractor is company then no reverse charge is applicable.

Reply to Point No. 2: The Service Tax should be charged @ 12.36% on 40% value of Total Service including material portion (i.e. 4.944% (100*40%*12.36%).

Querist : Anonymous

Querist : Anonymous (Querist)

04 February 2015 CA Parveen Kumar Ji,
Above calculation provided by you is absolutely correct as I self calculate it. Contractor has charged 40% on the bill amount Rs 1.50 Crore, then charge 12.36% on 40% which comes 741600. Now I want to know in this case would service tax liable in the hands of service recipient as contractor & contractee both are company???

CA Parveen Kumar

CA Parveen Kumar (Expert)
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08 February 2015 No Service Tax chargeable in hands of service recipient.